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SaaS – leveling the playing field?

In titling his memoirs “Who says elephants can’t dance?,” Lou Gerstner, IBM’s famed former CEO, played on the common belief that large companies are slow lumbering behemoths slowly walking across the savannah, as it were, easily overtaken by smaller more nimble competitors.

 But is this always really true?  Having worked for companies both large and small, I know that large companies often had more data about their operations and the business intelligence tools to drive efficiencies with dashboards of data delivered to top executives.  In contrast, in the SMB companies I’ve worked at, I’ve had to photocopy key reports, stuff them into envelopes and hand deliver, yes hand deliver, them to each executive.  The large companies I worked for had automated and web enabled their business processes.  The smaller ones still had large filing cabinets with people faxing paper, making photocopies, and entering data into Excel spreadsheets – manual processes that not only slowed down all aspects of their business, but also denied executives of data that they needed to make better decisions.  Sure they could make decisions faster than their counter parts at larger companies but with the paucity of data, were the small companies really making better decisions?

The difference, of course, was access to information technology.  Large companies could afford it while smaller ones could not.  For smaller companies, buying and deploying IT systems and software – e.g. ERP systems – that could make a difference was often cost prohibitive; not so for large companies.  So is it any surprise that elephants can dance?  Not really.  These are elephants who used information technology as rocket propelled skates to help them speed across the savannah and win in business.  How?  By having the IT systems in place, large companies could, as a few examples, better their smaller rivals in driving cost and manufacturing efficiencies in their supply chains, managing their human talent, and ensuring that they had the information needed to drive sales and manage their customer relationships.

 Now, however, we have Software as a Service (SaaS) – a new paradigm that democratizes access to information technology.  Small companies are no longer locked out of information technology because of the large license fees for on premise installations.  Instead they can access the same IT capabilities over the web using a low cost subscription model – leveling the competitive playing field.

 The interesting question that arises is, “Now what?”  If large companies lose one of the key advantages they have over smaller rivals and now can no longer count on having more efficient operations or greater business intelligence, will they return to being lumbering giants moving relatively slowly across the savannah?  Will it mean that elephants won’t be able to dance anymore?

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6 Comments

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  1. Vijay Vijayasankar
    SaaS has some disadvantages too – atleast in short/medium term. It has a tendancy to be generic to cater to a wide audience, and it generally has lesser ability to integrate with other solutions. And finally, even popular ones like SFDC has big limitations on BI.

    The larger companies will have more $$ to invest in differentiating technology, and use SaaS for commodity SW needs. And consequently they stand a good chance of not letting SaaS get their smaller competitors to catchup.

    Essentially, although SaaS will get really good over time, I don’t see any the “30 years from now, Daddy and I will be the same age” situation happening in Enterprise SW 🙂

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    1. Rahul Asthana Post author
      Vijay –

      Thanks for your comment.  I do agree that the multi-tenancy requirement in SaaS means that it has disadvantages in providing customized capabilities.  I also think that if companies want to customize, but don’t want to host, they may move to an ASP model.  Right now, it looks like the world wil be hybrid with On Premise, ASP, and SaaS all playing a role.  Will have to see how far this will remain the case, or if innovations in SaaS will appear that will tip the scales in its favor.

      Rahul

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  2. Bikas Tarway
    Hi,

    Agreed with your views.
    But in my point of view only ERP is not the driving force which make the business big, IT is just a supporting tool to manage the business.

    What make big companies really big is their customers, vendors  supply chain, their big man power & capacity to execute large projects.  For example – A big company can with largest consumer base can influence it’s supplier to supply at the cheaper rate compared to a small company who’s order volume is significantly less.

    Regards
    Bikas

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    1. Rahul Asthana Post author
      Hi Bikas –

      Thanks for your comment.  I think everything you’ve said is true.  However, it is also true that smaller companies are generally considered more nimble…witness Google recently overhauling its management because it thought it had lost its ability to make decisions and react to the market quickly.  My POV is a bit contrarian – at least from my experience.  Smaller companies may have fewer managers and approvers, but they also have slower processes because they are all manual driven.  That’s one reason (and only one reason) that smaller companies have a hard time competing against larger ones.  The other reasons are as you have outlined – better supply chains, better pricing, etc. 

      I think though that SaaS will at least remove one small company disadvantage – it will give them affordable access to IT capabilities that can remove the manual processes. 

      I think it will be interesting over time to see how true this POV really is…

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